Planning for school and university fees in the UK can be a daunting task for many families. The cost of education has been steadily rising in recent years, and it’s important to have a solid plan in place to ensure you’re able to afford the costs. One option that many families in the UK consider is using offshore bonds and trusts to save for their children’s education.
Offshore bonds are financial instruments that allow you to save money tax-efficiently for a specific goal, such as paying for school or university fees. These instruments are called “offshore” because they are typically based in countries with favorable tax laws, such as the Isle of Man or Jersey.
There are several advantages to using offshore bonds and trusts to save for education costs. First and foremost, these instruments offer tax advantages that can help you save more money over the long term. The specific tax benefits will depend on the specific bond or trust you choose, but they may include things like tax-free growth on your investments and the ability to gift bonds to your children without an immediate tax charge by what’s known as assignment.
Offshore bonds are not tax-free investments. It’s more accurate to describe them as tax-deferred investments. However, they do accumulate tax-free. What assignment does is to transfer the ultimate Income Tax liability from the donor to the donee.
In addition to the tax advantages, offshore bonds and trusts also offer flexibility and control over your investments. You can choose from a variety of investment options within an offshore bond, such as stocks, bonds, and funds, and the trustees can adjust your investments as needed to suit the goals and risk tolerance of the trustees in respect of the trust.
It’s important to note that offshore bonds and trusts are not suitable for everyone, and it’s important to carefully consider your options before making a decision. For example, offshore bonds and trusts may not be suitable for those with shorter time horizons, as the investment horizon for these instruments is typically longer term. Additionally, offshore bonds and trusts can be complex and may not be suitable for those who are not familiar with investing.
If you do decide to use offshore bonds and trusts to save for school or university fees in the UK, it’s important to do your research and choose a reputable provider. Look for a provider with a strong track record and good customer reviews, and make sure you fully understand the fees and charges associated with the bond or trust you choose.
In practice, it is always best to consult an Independent Financial Adviser. You know it makes sense.*
* Risk warnings
The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.